Syndicate accounts: annual accounting from 1 January 2005
From 1 January 2005, Lloyd’s syndicates moved to a system of annual accounting, in accordance with UK GAAP. This means that they produce accounts broadly comparable with those produced by insurance companies under company law.
Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2004
The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2004 (SI 2004/3219 - the ‘Lloyd’s Accounts Regulations’) came into force on 31 December 2004. The regulations implement, in relation to Lloyd’s, the Modernisation of Accounts Directive (2003/51/EC) and apply to financial years beginning after the Regulations came into force, namely from 1 January 2005. The financial year is the calendar year.
Each syndicate is required to produce a balance sheet and a single profit and loss account, with notes and analyses (such as cash-flow statements) in accordance with the usual provisions of company law. Certain adaptations are made to reflect the fact that a syndicate is not a company. It does not have directors, but it does have a managing agent. It does not have share capital, but it does hold funds representing members’ balances.
The Regulations also require the managing agent to produce a “syndicate underwriting year account” (LLM2040) for the closing year within the set of annual accounts. ‘Closed’ here means closed by paying a reinsurance to close (RITC) premium or, in the case of a single member corporate syndicate, by setting a provision for all known and unknown liabilities of the closing year.
Where all the members of the syndicate agree in writing that a set of syndicate underwriting year accounts need not be produced, the Regulations exempt the syndicate from the requirement. This is only likely to occur in practice on single-member corporate syndicates. Form AR102 of the syndicate’s Annual Return (LLM2050) will show equivalent information.
Lloyd’s Syndicate Accounting Byelaw
Further accounting requirements are set out in the Syndicate Accounting Byelaw (No.8 of 2005).
Run-off syndicates (LLM2070) are required, with some modifications, to produce accounts equivalent to syndicate underwriting year accounts (LLM2040). Again, where all the members of the syndicate agree in writing that such an account need not be produced, the syndicate is exempted from the requirement.